The United States installed 3.8 GW of new solar capacity in the third quarter (Q3) of 2020, a 9% increase from the second quarter (Q2), according to The Solar Energy Industries Association (SEIA) and Wood Mackenzie’s  U.S. Solar Market Insight Q4 2020 report.

The report projects a record 19 GW of solar installations for 2020, a 43% year-over-year growth.

Almost 70% of capacity installed in Q3 came from the utility segment, with 2.7 GW installed in the period. A record 11 GW of new solar capacity already installed in 2020 through Q3.

According to the ‘U.S. Solar Market Insight Q4 2020 report’, solar accounts for 43% of all new electric generating capacity additions through Q3 2020, more than any other electricity source.

“While solar will continue to grow, the next administration and Congress have an opportunity to help the solar industry reach its Solar+ Decade goals, creating hundreds of thousands of jobs and tackling the climate crisis,” said Abigail Ross Hopper, president and CEO of the SEIA.

Residential Solar

The residential market bore the brunt of the pandemic’s impact on the solar industry but had a relatively quick recovery with 738 MW installed in Q3 – a 14% increase from the previous quarter (though still below pre-pandemic levels).

“Logically, the states with the biggest installation declines in Q2 also had the biggest recoveries in Q3, such as New York and New Jersey where restrictions were substantial. Business model adaptations, such as virtual sales tactics and pricing promotions, continued to pay dividends through the summer and fall,” said Michelle Davis, senior analyst at Wood Mackenzie.

Nearly every residential solar installer responded to Q2 declines by offering rebates or discounts, which has also helped boost sales. The forecast for 2020 residential installations has increased to more than 3 GW, representing 7% growth over 2019.

The most significant limitation for the sector has shifted from sales to labor supply. Installation crews have been ramping back up and hiring more staff since the spring, but the labor supply is tight. The industry has now returned to the labor shortages experienced in late 2019 and early 2020 before the pandemic.

Non-Residential

Meanwhile, the non-residential PV segment (commercial, government, non-profit, and community solar) increased 8% from last quarter with 429 MW. Project development and construction activity picked up through the late summer and fall, and pipelines increased in growing state markets such as Maine, Virginia, and Illinois.

Many projects are still on delayed timelines due to permitting and interconnection bottlenecks during the second quarter, which will result in a 26% increase in 2021 installations as projects spill over into next year and developers rush to qualify projects before the investment tax credit (ITC) drops to 10% in 2022.

Another limitation for commercial solar this year has been securing tax equity financing. With an influx of solar projects requiring financing and general wariness from investors because of the current economic conditions, competition for tax equity financing has increased.

The combination of project delays and demand pull-in from the ITC means that 2021 is expected to be a record-setting year at nearly 2.4 GW. Additionally, 42% of the non-residential solar outlook in 2021 is expected to be community solar (The share is expected to be 38% this year and was 29% in 2019).

Utility-Scale

The utility-scale market was the primary driver of Q3 installations with 2.7 GW of new capacity, representing 70% of all solar capacity brought online in Q3. The 2020-2025 forecast has increased by 8.6 GW, according to the report.

This increase is due to 9.5 GW of new project announcements in Q3 2020, a surge of new utilities announcing carbon reduction or renewable energy targets, and increased confidence in project buildout.

Sun Belt states lead the way on new capacity additions this year, with Texas and Florida both installing more than 2 GW through Q3 2020. For perspective, that is nearly the amount of solar that each of those states installed over 2018 and 2019 combined.

The utility-scale project pipeline ballooned to a record 69.2 GW, and the U.S. is now predicting 100 GW of cumulative installed solar capacity by mid-2021.

Demand for utility solar has increased with many regions announcing higher renewable targets through state Renewable Portfolio Standards (RPSs) policies and local utilities announcing solar procurement plans or carbon reduction targets.

Despite record installations and procurement, some potential downsides remain. As financial markets continue to experience uncertainty amid the pandemic, access to tax equity is becoming tighter for new entrants and smaller developers.

Additionally, the capacity of qualified Tier-1 engineering, procurement, and construction (EPC) has not kept pace with the procurement surge. Both factors primarily impact developers with small portfolios and are unlikely to lead to cancellations but could cause delays for projects looking to come online between 2021 and 2023.

Potential impacts of the election

While the incoming Biden administration has signaled an intention to deploy more solar, numerous political uncertainties render quantitative market analysis too speculative at this point. Potential policies regarding tax credits, trade tariffs, decarbonization targets, and research and development spending could meaningfully support solar market growth. Still, we cannot predict market outcomes without more clarity on the scope of any policy changes.

Competing Global Markets

China has installed 18.7 GW of solar capacity in the first nine months of 2020, an increase of 17% compared to 16 GW installed during the same period in 2019, according to the latest data from the National Energy Administration (NEA). Large-scale solar installations accounted for 10.04 GW, and distributed solar accounted for the remaining 8.66 GW.

India added 438 MW of solar in the third quarter of 2020 (Q3 2020), a 114% rise over last quarter’s 205 MW, according to Mercom India Research’s newly released Q3 2020 India Solar Market Update. While Q3 2020 fared better than the previous quarter, the report showed that solar installations were still about 80% lower from the same quarter last year, which saw nearly 2.2 GW of solar capacity additions.

Germany added about 1.22 GW of new solar installations in the third quarter of 2020 (Q3 2020), a 34% increase from the same quarter last year, according to the latest data from Federal Network Agency Bundesnetzagentur.

However, the data showed that installations during the quarter were about 2.6% lower than the preceding quarter. Germany had installed about 1.25 GW of solar projects in Q2 2020 despite the global Coronavirus pandemic.

 

Image credit: USAF, Public domain, via Wikimedia Commons